Listening to HR’s Critics

In the July 17 issue of BusinessWeek, Jack Welch, former CEO of General Electric and one of the most effective CEOs of all time, joined a significant list of critics who have devoted articles to publicly stating why people hate HR. After reading this article closely, I can say for the record that I agree with him.

    I categorize the BusinessWeek article as a “hate HR” piece because most people in the profession will end up judging it as such. In reality, it is a prescriptive article that clearly tells HR what it must do to become “the killer app” in the corporation versus the marginalized overhead function it typically is. If you haven’t read the article, you should. It provides a prescription for greatness. Rather than repeating all of Jack and Suzy Welch’s criticisms here, I’ll outline the positive things HR must do to become the most powerful player in any organization (which is how the Welches describe the potential role for HR).

    The Welches’ first challenge to HR is to elevate its approach to the level of financial management. They say that using our current approach has kept HR relegated to the background. It is true that some in HR have gotten the much-discussed seat at the table, but my little brother Ricky also had a seat at our table at home, and no one paid much attention to him. Rather than relishing a seat, HR must transform from top to bottom and learn to act solely as a business-impact function.

    It’s time to realize that the other functions that are clearly “overhead,” like finance (formerly accounting and bookkeeping), IT (formerly office equipment repair) and supply chain (formerly purchasing and shipping), have used this business-impact approach to become corporate heroes. Here are four radical things that HR must do to join them:

    Quantify and convert people-management results into dollars. We must convert the impact of people issues and our program results into dollars in every area. It’s particularly necessary in capturing the productivity of the workforce, the cost of a vacant position, the negative cost of keeping a bad manager and the dollar impact of hiring and keeping top performers versus average ones in mission-critical jobs. This means building a solid partnership with the CFO’s office. The CFO is the undisputed king of placing valuations on activities that are difficult to enumerate.

    Drop the socialist “treat them all the same” mentality. Instead, HR must prioritize business units and jobs so that HR time and budget resources are focused primarily on the areas that most influence corporate revenue and profit. This means prioritizing the four critical HR functions that the Welches emphasize: hiring, development, promotions and poor-performer turnover.

    Adopt, as other successful functions have, “fact-based” decision-making. This should be the expected standard in HR. Rather than speculating or saying, “I think” or “I believe,” HR must become the expert and actually know the cause and effect, as finance and supply-chain people do. Things that HR must know include the causes of turnover, what motivates workers to produce more, and which HR actions can turn a business unit around. This means HR must shift away from its soft approach and instead become like the rest of the business elite. They rely on hard data to make every decision.

    Populate the HR profession with individuals who have run businesses and have P&L experience. As the Welches suggest, in order to become businesslike, HR must primarily recruit people with business school degrees or with experience outside of HR. This might seem harsh, but if you want to join the elite functions in business, your team must change from mostly administrative players to hard-core businesspeople.

    Our profession can criticize those who criticize us, or we can accept their judgments as universal truths and change. Do you have the courage?

Workforce Management, July 31, 2006, p. 42 — Subscribe Now!